US equity futures and European markets are broadly higher led by Tech/Small-Caps following a dovish Powell press conference (which reversed the hawkish FOMC statement) and solid, if hardly stellar (see MSFT), earnings. As of 8:00am ET, S&P futures are up 0.25%, off session highs; Nasdaq futures rise 0.3% with Mag 7 names mixed (GOOGL +0.7%, AMZN flat, AAPL -0.4%, MSFT -4%, META +1%, NVDA -0.8% and TSLA +2%). European markets are solid in the green ahead of what is widely expected to be the 5th consecutive ECB rate cut later Thursday to revive the sluggish eurozone economy. Bond yields are lower as the curve flattens and USD weakens on the back of continued strength in the JPY which will continue until Japan's exports crater. Commodities are mixed with strength in both base and precious metals while oil has reversed earlier losses. Today’s macro data focus is on jobless claims and Q4 GDP data ahead of tomorrow’s Dec PCE print, after the close we get AAPL earnings.
In premarket trading, IBM gains 8% after fourth-quarter results beat expectations on key metrics, thanks to strong growth in its software business. Microsoft fell 4% after saying said its cloud-computing business will continue to grow slowly in the current quarter as the company struggles to build enough data centers to handle demand for its artificial intelligence products. Meta Platforms (META) rises 1% after the Facebook parent reported fourth-quarter results that beat expectations. CEO Mark Zuckerberg predicted that 2025 will be a “really big year” in AI. AI infrastructure stocks extend their advance, including Broadcom (AVGO) +4%, Marvell Technology (MRVL) +3%. Mag 7 names are mixed (GOOGL +0.7%, AMZN flat, AAPL -0.4%, MSFT -4%, META +1%, NVDA -0.8% and TSLA +2%). American Airlines (AAL) declines 2% after a regional jet flown for the carrier collided with a military helicopter near Ronald Reagan Washington National Airport. Here are some other notable premarket movers:
Attention now turns to the world's biggest company Apple (after NVDA lost that spot on Monday) which is expected to post record results when the company delivers quarterly earnings later today. Tech stocks continued to power ahead in premarket trading, with IBM jumping 8% and Meta Platforms Inc. rising on hopes for future artificial intelligence gains. Tesla Inc. climbed as much as 4.1% amid investor optimism about the company’s robotaxi business and AI prospects.
The technological arms race has defined global markets this week, with Chinese startup DeepSeek claiming to have made significant progress on its AI model at a fraction of the price. That put a question mark over the spending and investment plans of Silicon Valley firms in the runup to the earnings announcements, sparking a market slump on Monday. Microsoft shares bucked the upbeat mood, falling 3.9% in early trading, as the firm struggles to build enough data centers to handle AI demand.
Attention also turns to the ECB which is expected to cut rates by a quarter-point later Thursday to revive the sluggish eurozone economy. European government bonds gained after gross domestic product figures came in weaker than expected for Germany and France.
“The divergence trade is alive and well with a widening gap between European and US growth expectations that has translated into a much more dovish outlook for the ECB relative to the Fed,” said Daniel Murray, Zurich-based chief executive officer of EFG Asset Management.
And speaking of Europe, on the continent stocks advanced to another record high; real estate, industrials and tech outpperform while telecoms and banks are the only sectors to fall. The Stoxx 600 rises 0.5% to 536.77 with 457 members up, 141 down and 2 unchanged. Here are some of the biggest movers on Thursday:
Earlier in the session, Asian equities rose slightly, as Australian stocks gained for a second day amid hopes for easier monetary policy. Most major Asian markets including China, South Korea, Taiwan and Hong Kong remained closed for the Lunar New Year. The MSCI Asia Pacific Index rose as much as 0.2%, touching its highest level since Dec. 18, with Hitachi and BHP among top contributors. Positive results from global tech majors including Meta and Tesla provided a lift, as did news that SoftBank Group is in discussions to invest as much as $25 billion in OpenAI. The regional benchmark is poised for its first monthly rise since September, amid hopes for a softer stance on trade tariffs by US President Donald Trump. That’s helped counter the recent hit to Nvidia and others from the surprise news of China’s AI advancement with DeepSeek.
In FX, the Bloomberg Dollar Spot Index falls 0.1%. The yen tops the G-10 FX leader board, rising as much as 0.6% against the dollar as fast money traders lined up bets on the currency, according to an Asia-based FX trader.
In rates, the yield on 10-year US Treasuries was down two basis points at 4.50% after the Federal Reserve left interest rates unchanged yesterday, adopting a “wait and see” approach with inflation still above the 2% target. German bonds lead a rally in government debt after data showed the euro area unexpectedly stagnated at the end of last year. German 10-year yields fall 6 bps to 2.52% as traders add to their ECB interest-rate cut bets for the year ahead of the policy decision later Thursday. The euro falls 0.1% to ~1.0410.
US economic data calendar includes 4Q advance GDP and jobless claims (8:30am) and December pending home sales (10am). Fed speaker schedule resumes Friday with Bowman speaking on the economy and banks at 8:30am
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APAC stocks were ultimately mixed amid the ongoing mass closures in the region and after the choppy performance stateside in reaction to the FOMC, while the first earnings results from the magnificent 7 stocks were also varied. ASX 200 climbed to a fresh record high amid broad strength across sectors and further calls for a February RBA rate cut with NAB joining the rest of Australia's big 4 banks in forecasting a cut next month. Nikkei 225 swung between gains and losses amid earnings releases and as the index largely shrugged off a firmer currency.
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European bourses (Stoxx 600 +0.5%) are generally modestly firmer across the board, as sentiment improves from a mostly mixed APAC session; the AEX/IBEX 35 are the European outperformers. European sectors hold a strong positive bias; aside from the top performer, the breadth of the market is fairly narrow. Real Estate leads, whilst Telecoms is pressured by BT (-3.5%) post-earnings. For Banking names, BBVA (+3.5%) gains after it beat estimates and announced a near EUR 1bln share buyback. Caixabank (-1%) slips a little lower after lending income came under pressure. Deutsche Bank (-4.5%) sinks after its results (details below).
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DB's Jim Reid concludes the overnight wrap
Morning from Milan where the DB 2025 Outlook tour rolls on and where I'm hopeful I'll see double digit celsius temperatures for the first time in a while. Tech and AI, and their influence on macro, continue to dominate the conversations and last night we had the first three Mag-7 companies report after the bell. It was a bit of a mixed bag but US futures are higher this morning.
Firstly Microsoft’s shares fell by nearly 5% in post-market trading despite a headline beat, as cloud revenue growth missed estimates amid capacity constraints in the company’s data centre business. Meta delivered a solid earnings beat, but its Q1 sales guidance of $39.5bn to $41.8bn came towards the lower end of expectations ($41.7bn midpoint). Still, Meta shares gained about +2.5% after-hours as Zuckerberg predicted that 2025 would be a "really big year" for Meta's plans in AI. Tesla initially slipped after missing Q4 revenue estimates, but was more than +4% higher by the end of after-hours trading after reassuring investors that it expects to return to positive sales growth this year with Musk claiming “epic” growth ahead. This mixed bag hasn't hurt US equities with Nasdaq (+0.59%) and S&P 500 (+0.33%) futures higher.
Prior to those results, the Mag-7 fell by -0.92% in the regular session, underperforming a -0.47% decline for the S&P 500. This was mostly driven by Nvidia (-4.10%), which reversed a good chunk of Tuesday’s rebound, in part after Bloomberg reported that the Trump administration officials were considering expanding restrictions on exports of Nvidia chips to China. Microsoft (-1.09%) and Tesla (-2.26%) also lost ground ahead of their earnings releases.
Turning to the Fed decision, as widely expected the FOMC kept the fed funds rate unchanged in the 4.25-4.50% range after delivering 100bps of cuts over the previous three meetings. The on hold decision was accompanied by some potentially hawkish tweaks in the press release, notably removing wording that “inflation has made progress toward the 2% objective”. However, Powell later downplayed this change, also referring to the policy stance and the economy as in a “good place”. He said that the Fed needs to see “further progress” on inflation or a labour market weakening to ease policy further, but added that the Fed did not need to see inflation “all the way back to 2%” to cut rates. In terms of the immediate signal, Powell appeared to downplay the likelihood of a rate cut in March, saying that “we don't need to be in a hurry to adjust the policy stance”, though he noted that the policy stance was still “meaningfully restrictive”.
The Fed chair largely avoided getting drawn on the potential implications of the new Trump administration, pointing to uncertainty around tariffs, immigration, fiscal and regulatory policies and saying that the Fed will have to “wait and see”. Following the meeting, our US economists continue to think that the fed funds rate is likely to remain above 4% this year, with a base case of no additional cuts.
Post the FOMC, money markets further reduced the pricing of a rate cut in March, with its likelihood down to 19% by the close from 30% prior to the decision. But further out the curve an initial move higher in rates reversed as Powell downplayed the potentially hawkish policy statement signal. The amount of rate cuts priced by the December meeting fell -2.6bps on the day to 47bps, but this move had come prior the Fed. And long-dated Treasury yields ended the day a couple of basis points below their pre-FOMC levels, with the 10yr yield inching -0.3bps lower to a new 2025 low of 4.53%, despite almost touching 4.59% as Powell spoke. Equities also mostly shrugged off an initial negative reaction, with the S&P 500 (-0.47%) closing largely in line with its pre-FOMC level, having traded as much as -0.9% down during the press conference. As discussed at the top, the tech mega caps underperformed but the decline was fairly broad based with the equal-weighted S&P 500 down -0.34%.
Ahead of the Fed’s decision and all the evening news, the European session was a pretty resilient one, with equities advancing across most of the continent. That included a fresh record high for both the STOXX 600 (+0.50%) and the DAX (+0.97%), whilst the FTSE 100 (+0.28%) closed just shy of its peak last Thursday. However, the CAC 40 (-0.32%) lost ground, which came following underwhelming results from luxury giant LVMH (-4.98%) and amidst a wider underperformance in French assets as concern mounted about whether the Socialists would continue to support the government. That also led to a widening in the Franco-German 10yr spread, which moved up +0.7bps to 73.9bps.
The other main story in Europe was a pickup in natural gas prices, with futures up +6.17% yesterday to their highest level since October 2023, at €51.45/MWh. That was partly the result of supply issues in Norway, along with cooler weather that’s forecast for the days ahead. So that led to a bit more concern about inflationary pressures, with yields on 10yr bunds paring back their initial decline to close up +2.1bps.
Inflation and central banks will stay in the spotlight again today, as we’ve got the ECB’s decision coming up this afternoon. In terms of the decision, it’s widely expected they’ll deliver another 25bp cut, taking their deposit rate down to 2.75%. So the bigger question will be how long they’ll continue to cut rates, particularly with core inflation still lingering above 2%. For today, our European economists share that view expecting another 25bp cut, and think the description of the policy stance will be unchanged relative to the last meeting in December. However, the main risk for them is that the ECB will tweak the description of recent data in a hawkish-leaning direction.
In other central bank news, the Bank of Canada delivered their own 25bp rate cut yesterday, taking their policy rate down to 3%. The statement explicitly acknowledged the risk of US tariffs, saying that “a protracted trade conflict would most likely lead to weaker GDP and higher prices in Canada”, and that “if broad-based and significant tariffs were imposed, the resilience of Canada’s economy would be tested.” Alongside the rate cut, they also announced their plan to end QT, which would see asset purchases restart in early March.
Finally, there was some important US data on the merchandise trade deficit, which widened by an unexpectedly large amount to a record $122.1bn in December (vs $105.5bn expected), perhaps reflecting front-running of imports ahead of possible tariffs. That’s significant as that’s led to a notable drop in GDP trackers for Q4, with the Atlanta Fed’s GDPNow estimate dropping from an annualised +3.2% pace on Tuesday to +2.3% yesterday.
Overnight in Asia, the Nikkei 225 in Japan is trimming its gains this morning and is up just +0.07%. The Yen is around half a percent stronger after continued QT chatter after the phasing out of a loan program in last week's BoJ meeting. Markets in China, Hong Kong and South Korea remain closed for holidays. Meanwhile, the US 10yr yield is modestly down by -0.4bps and the front end (2yr) is unchanged.
To the day ahead now, and the main highlight will be the ECB’s policy decision and President Lagarde’s subsequent press conference. Data releases include the Q4 GDP readings from the US and the Euro Area, the US weekly initial jobless claims, and UK mortgage approvals for December. Finally, we’ll get earnings releases from Apple, Visa, Mastercard, Caterpillar and UPS.